Austerity for us, double digit pay rises and champagne for them.

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financeguy

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Bank chiefs enjoy double-digit pay rises

By Daniel Schäfer in London


Top US and European bankers, including JPMorgan Chase’s Jamie Dimon and Citigroup’s Vikram Pandit, have enjoyed double-digit annual pay rises averaging almost 12 per cent, despite widespread falls in profits and share prices, Financial Times research shows.

The disclosure will stoke concern on both sides of the Atlantic over chief executive pay levels that has already led to several high-profile investor revolts, including at Citi and at Barclays. It comes as Europe’s leaders debate a cap on bank bonuses.

The analysis of total pay awarded to 15 bank chiefs by Equilar, a US pay research group, shows they received an average 11.9 per cent pay rise last year to $12.8m, the second increase in a row. However, the pace of growth has slowed.

Bankers such as Brian Moynihan at Bank of America, Citigroup’s Mr Pandit and JPMorgan’s Mr Dimon enjoyed the largest gains.

Mr Dimon, whose reputation as one of the best managers in banking has been hit by a $2bn trading loss in a supposedly safe division of JPMorgan, topped the list for the second year in succession with a $23.1m pay package that was 11 per cent higher.

The analysis by Equilar adds up base salaries, cash bonuses and certain other benefits. It also includes option and stock awards that were granted in 2011, some of which to reward performance in previous years.

It shows that fixed salaries continue to rise while variable cash payments are sinking as regulators clamp down on bonuses. But average stock and option awards increased by 22 per cent.

“Regulators try to prevent banks from taking the outsize risks that led to the financial crisis. But the problem is that shareholders still like outsize returns,” said Albert Laverge, head of the global investment banking practice at Egon Zehnder.

Mr Pandit’s pay soared to $14.9m after the $1 salary of the previous two years was ditched. He had pledged constraint until the bank would return to profitability, which it did in 2010.

His pay package, which ranks in the middle of the FT survey, sparked an investor revolt at Citigroup’s annual meeting in April that triggered a wider shareholder uprising against executives’ pay levels in Europe and the US.

In the UK, Bob Diamond at Barclays came second in the survey with a $20.1m pay package that was inflated by a contentious £5.75m tax bill covered by his employer. António Horta-Osório was awarded total pay of $15.7m in his first year at partly state-owned Lloyds Banking Group, thanks to a welcome package and despite giving up his cash bonus after a stress-related two months’ leave.

The European Union is debating a possible cap on bonuses that would maximise the variable payout at 100 per cent of fixed salary.

Tougher regulation has prompted many banks to increase fixed salaries, defer large parts of bonuses and subject them to clawbacks in the case of future losses.

The average pay rise came in a year when the FTSE world banks index fell by a quarter, more than the overall world index. Only three of the 15 banks in the survey – Wells Fargo, BBVA and JPMorgan Chase – have outperformed the world banks index while none has beaten the general index.

Bank chiefs enjoy double-digit pay rises - FT.com

I'm tired of this crap. When does the revolution start?
 
That you and LemonMelon can't agree on who should start the revolution.

I was trying to be humorous.
 
I constantly hear about how Americans have an "entitlement" problem whenever there's talk of raising the minimum wage or stopping CEOs for cutting benefits and pay raises/bonuses. It annoys me to death. Many college graduates don't even make a living wage in America and they are making above minimum wage. Then you hear about this stuff... and it's just... ugh. It annoys me that dozens, hundreds, or even thousands of employees suddenly see a drop in benefits and have to pay for their own health just so some stuck up CEO can make a few extra hundred grand a year. Isn't the pay ratio 475:1 in America?
 
it's truly disgusting... well, i think people are waking up and starting to gripe about the injustices at long last at least! they can't get away with it for too much longer can they?
 
Maybe a shareholder revolution?

Yarite.

Like most people care so long as their dividend cheques are coming in and their returns are greater than they would have been sitting in a bank account.
 
Yarite.

Like most people care so long as their dividend cheques are coming in and their returns are greater than they would have been sitting in a bank account.

The context is that the companies are not making money or are making less money than in the past (where would dividend cheques come from if there's no retained earnings?) yet big bonuses are being paid out. It's like getting a pay cheque without actually earning it or borrowing from the bank for the bonuses and not for the company. The problem is that in the past shareholders used to be larger owners of shares and could influence directors and CEOs didn't have an entitled job. Nowadays investors often don't even own the shares but just mutual fund units and so they are so divorced from the reality of companies that CEOs and directors and government insiders can create an entitled class of their own like an aristocracy via basic networking. A lot of shareholders are gamblers so they don't own the shares for that long. They just ride the train until they find another train that is better. Of course you could lose your shirt doing that. Basically the general public and powers-that-be are all greedy and want to make a killing so they can retire early because they don't like work and would rather play all the time. Since retained earnings on a Statement of Financial Position can only be collected over time all these large capital gains must be earned on the back of losers who bought at the wrong time. This mentality of "flipping" greedy consequences is pervasive in our society. Real capital gains are retained earnings. The rest is just a zero sum game. Profits happen with more efficiency and can be reinvested so that companies can grow, products become more numerous (cheaper standard of living) and products increase in quality. All the other stuff that doesn't fit into that often involves bad regulations that don't do anything, good regulations that aren't even being enforced and just plain robbery.
 
The context is that the companies are not making money or are making less money than in the past (where would dividend cheques come from if there's no retained earnings?) yet big bonuses are being paid out.

If you're making less money than in the past, but you're still making money, and your stock is holding up reasonably well and the dividend cheques are coming out, most shareholders don't give a half a crap that the CEO pay is increasing disproportionately compared to their returns.

There are some things that have been introduced, like say-on-pay resolutions and so on but most of these are without real teeth.
 
most shareholders don't give a half a crap that the CEO pay is increasing disproportionately compared to their returns.

They should or else they are crappy investors, which is probably the case. :D

There are some things that have been introduced, like say-on-pay resolutions and so on but most of these are without real teeth.

That's the problem how do we get some teeth into resolutions or regulations without overdoing it? The board of directors don't seem to be scared of being fired by shareholders.

Then when you have low interest rates constantly there's not much incentive to invest in safe investments so it's another reason why investors don't mind risking more. And we are also talking about investors. Many people don't have much investments but larger amounts of debt so it's easy to see a shrinking middle class.

I guess the best revolution there is is a grassroots one where people force themselves to spend less and invest more (in safer low return investments) which will provide the incentive for companies to offer more to shareholders. Also when people are not over consuming companies have to adjust to clients who aren't addicted to their products and at some point the CEO pay will have to be addressed by the company themselves if they want to survive. When the economy recovers the government will have to slowly raise interest rates and try much harder to keep gambling bubbles misallocating a large portion of the economy's capital. The key is that the general public has to show some savings over time and the ability to retire. That's the best signal I can think of, otherwise there will be a pyramidal society where the bottom will revolt and maybe institute an even worse tyranny (Soviets, French revolution terror). That would be a shame to repeat that.
 
pparently our economy has dictated these people deserve an annual income of such a ridiculous amount

if they don't get these payrises someone else will offer it to them
free market and all
 
Why can't large companies save money by exporting the top management jobs to India? As the cost of living is cheaper, an Indian, even a top manager, would work for much less. That's globalisation, right? Free market and all that?
 
hey did you hear about Barclays getting fined 290 million today? 'bout time too!
 
I don't support execs making ridiculous pay levels, but at the same time I don't support legislators out for their own self-interest imposing arbitrary limits pulled out of their asses on those executives' pay levels.

What's a guy like me to do?
 
I don't know a lot about economics and business here, but why couldn't we just set a requirement that the CEO can't make over a certain amount times the average worker? For example, a CEO can make whatever salary he wants as long as the other workers' pay increases as well.

I'll use the highest CEO-to-Worker pay average behind the United States as an example here, which is 50:1 in Venezuela.

If the average worker is making $30,000 a year and the CEO makes 50x that, that's $1,500,000. If the company was doing really well and the CEO wanted to make $3,000,000 the average worker would also take a double increase in pay. The max limit could be changed based on the number of employees a company has etc. This isn't really a foolproof way of doing things, but it can prevent ridiculous crap like an employer making 400x what his average worker makes.
 
I think they have that precise system in some of the Scandinavian countries. I personally have reservations about that approach. I think it's better to use moral suasion rather than the blunt instrument of the law. But, we have to face up to the fact that a portion, possibly a substantial portion, of business leaders are apparently greedy sociopaths. Greed, well, that is just a human instinct that when acted upon can have good and bad results. Sociopathy, though, can be dangerous for society, particularly when combined with greed.
 
I think it's better to use moral suasion rather than the blunt instrument of the law
The thing is that in a population of individuals, there are always going to be a percentage of assholes that ruin it for the rest of us if we rely solely on people doing the "right thing" and not gaming the system or abusing it.
 
I think they have that precise system in some of the Scandinavian countries. I personally have reservations about that approach. I think it's better to use moral suasion rather than the blunt instrument of the law. But, we have to face up to the fact that a portion, possibly a substantial portion, of business leaders are apparently greedy sociopaths. Greed, well, that is just a human instinct that when acted upon can have good and bad results. Sociopathy, though, can be dangerous for society, particularly when combined with greed.

Yet economists also can write about morality but that gets ignored my pathological narcissists:

The Theory of Moral Sentiments - Wikipedia, the free encyclopedia

http://www.mises.org/books/foundationsofmorality.pdf

Usually it's the grassroots that make the biggest change in society when they are really motivated. Top-down solutions can have only limited effects and sometimes too much power corrupting lawmakers and leading to the exact same problems we are trying to avoid. (eg. colonialism).
 
The biggest trouble with trying to create a plan like that is that it's tricky. Some companies have tens of thousands of employees, or hundreds of thousands, around the world. How do you scale for something like that? There has to be a good profit margin and middle ground and there's a lot of complicated stuff that I can't even begin to understand about economics and how businesses are run. :(
 
hey did you hear about Barclays getting fined 290 million today? 'bout time too!

Lot of fallout from this one, the UK government are really pissed off - probably because it effects the reputation of UK plc as a trustworthy place to do business. It's highly unusual to see conservative ministers directly calling for bankers heads on plates.


Vince Cable tells shareholders: throw out bank cheats | Business | The Observer

Barclays: Osborne Slams 'Systematic Greed'
 
Lot of fallout from this one, the UK government are really pissed off - probably because it effects the reputation of UK plc as a trustworthy place to do business. It's highly unusual to see conservative ministers directly calling for bankers heads on plates.


Vince Cable tells shareholders: throw out bank cheats | Business | The Observer

Barclays: Osborne Slams 'Systematic Greed'

sure, but what really pisses me off about this apparent government U-turn re. wbankers, is that these people have not been called to account because they brought the country to its knees economically, but simply because they have damaged the "image" of the City of London and, more importantly, have been caught with their pants down
 
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